A Capstone Project is an assignment designed specifically to apply and showcase the skills you learned in the Specialization. To this end, the Business Strategy Capstone Project, a comprehensive Strategic Analysis, provides an opportunity for you to synthesize concepts and knowledge from the four prerequisite courses in the specialization. You may continue with the organization you selected for previous assignments or select a new organization for this project. You will analyze the current state of the organization, strategic issues facing the organization, strategic paths the organization might pursue, make a recommendation of the best path for the organization to pursue, and write an Executive Summary. Your finished project will serve as an artifact showcasing your ability to conduct research on/within an organization, select and apply the most appropriate analytical tools, build a well-supported case for a specific position, and effectively communicate key points with executive leadership.

Taught By

Michael Lenox

Jared Harris

Transcript

Payoff Matrices can be an important part of a strategist's toolkit, especially as it relates to understanding the competitive dynamics between two or more competitors. The purpose is to identify dominant strategies, especially in single-period simultaneous-move games. We see here illustrated a game for a price cutting scenario between two firms. From one can either cut their prices or not and similarly firm two could as well. The payoff matrix is a way of mapping out the pay offs associated with these various strategic actions. They could be probabilistic, we could be talking in expectation we'll make a $100, or they could be very precise we know for a fact this is the amount we're going to make. By creating this little matrix here, we're able to start to understand the incentives for each player in taking each of these strategic actions, and in particular we're going to look for in our steps here, dominated strategies, ones that we will pursue no matter what happens to the other player. So consider firm one. They get a path of $200 if they do appraise cut and the other firm doesn't. They increase their market share, they gain more demand as a result of that scenario. So, $200 is better than the no cut situation so they prefer a cut. But interestingly, even in the situation where firm two cuts their prices, we also decide to cut our prices here because $0 is better than negative 30. So this creates a dominated strategy for firm 1 to take over and cut their prices. Now this is a symmetric game where the payoffs are the same for both firms, so interestingly enough, firm 2 has exactly the same logic and they end up here in a cut, cut scenario. So the payoff matrix here provides insight for us to understand what would likely happen if we start to engage in a price cuttings scenario here. And perhaps then suggest to us, other ways that we can restructure their game to avoid the competitive outcome that we don’t desire here. Maybe changed in the deferential and fails between us and our competitor, or maybe just simply restructuring the game in a fundamental way, so we don't have this result for us. In general Payoff Matrices, could be useful again to understand the moves and counter moves of various competitors in a rivalrous situation.

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